The North East of England is facing a looming insolvency crisis as businesses grapple with rising costs, supply chain disruptions, and a weakened consumer economy. With Christmas just around the corner, the region’s firms are bracing for a challenging end to the year and an uncertain start to 2024.
Rising Insolvency Figures
Insolvency specialist Begbies Traynor has reported a significant increase in the number of North East businesses seeking administration in recent months. The firm’s data shows that the number of administrations in the region rose by 12% in the third quarter of 2023 compared to the same period in 2022. This trend is expected to continue in the fourth quarter as businesses face the additional pressure of the Christmas trading period.
Factors Driving Insolvency
The rise in insolvencies is being attributed to a number of factors, including:
- Rising costs: Businesses are facing significant increases in their costs, including energy, fuel, and raw materials. These increases are putting a strain on profit margins and making it difficult for businesses to survive.
- Supply chain disruptions: The ongoing supply chain disruptions are causing businesses to lose out on vital supplies and are leading to increased costs and delays. This is particularly challenging for businesses in the manufacturing and retail sectors.
- Weak consumer economy: The consumer economy is weakening as households tighten their belts in response to rising costs of living. This is leading to a decline in consumer spending, which is further impacting businesses’ profits.
Christmas Trading Concerns
The Christmas trading period is typically a busy and profitable time for many businesses. However, this year, businesses are concerned that the challenging economic conditions will dampen consumer spending and lead to a disappointing Christmas season. This could further exacerbate the insolvency crisis in the North East.
Government Support
The government has introduced a number of measures to support businesses through the challenging economic period. These measures include:
- Energy price caps: The government has introduced energy price caps to help businesses and households with their energy bills.
- Business support grants: The government has also provided a number of business support grants to help businesses with the costs of doing business.
- Loan schemes: The government has also introduced a number of loan schemes to help businesses access the finance they need to survive.
However, businesses are calling for more support from the government, arguing that the current measures are not enough to prevent a wave of insolvencies.
Conclusion
The North East is facing a looming insolvency crisis as businesses grapple with rising costs, supply chain disruptions, and a weakened consumer economy. The Christmas trading period is expected to be particularly challenging, and businesses are calling for more support from the government. The coming months will be a critical test for the region’s businesses, and it remains to be seen whether they can weather the storm and emerge stronger on the other side.
Additional Points
- The insolvency crisis is particularly affecting small and medium-sized businesses (SMEs), which are often less resilient than larger companies.
- The construction, hospitality, and retail sectors are particularly vulnerable to insolvency.
- The rise in insolvencies could lead to job losses and further exacerbate the economic downturn in the North East.
- The government needs to take urgent action to provide more support for businesses and prevent a wave of insolvencies.